What are the Main Differences between a Construction Home Loan and a Land Loan?
There are very few people who know that banks offer construction home loan to buy apartments or build houses on the land. But many people invest in land because it appreciates significantly over time.
Investments in Land and Gold are more prevalent in India than in other investment venues! Can one get a loan just for buying a plot of land for investment purposes? Yes, one can get a land loan.
There are, in general, a few minuscule differences between a personal loan and a home loan, but there should be noted in the fine print.
When can you opt for a home loan?
It is only possible to get a home loan for a house that has been constructed, constructed, or built within a short timeframe.
In the third condition of the loan, the applicant must start construction of the house within a specified period after receiving the loan.
Banks like the SBI offer home loans to landowners who promise to build a house within two years after purchasing the land.
Banks like ICICI prefer property owners to construct a house within two years of buying a piece of land! In the end, the buyer is responsible for deciding what a financially viable option is.
When are land loans available?
It makes sense to take out a land loan if you only intend to buy the land as an investment.
Documentation requirements, repayment options, and general terms and conditions are similar, but only the following points need to be taken into account:
· Land type
Residential plots are the only ones eligible for a land loan. An agricultural land loan cannot buy a commercially assigned layout. The plot must be within a corporation or municipality, so rural plots may not be feasible!
· The value of LTV is lower
A Loan to Value refers to the amount of a loan that would cover the purchase of a property. A home loan covers 80 percent or more of the total cost of the property without taking into account registration fees and documentation charges.
However, a land loan will cover less than 70% of the total land cost, which is more than 30% of the initial cost to the buyer of the land.
· Maximum loan amount
If an individual has no debts, the maximum home construction finance loan amount is 60 times their monthly salary.
Regardless of your salary, banks cap the amount of a land loan at a certain amount. Bank policies can vary widely and could end up being a deal-breaker for many! For more information visit our website.
